Question
8. John's utility function for cola and hamburgers is given by U ( C , H )= C 1/3 H 2/3 , where C and
8. John's utility function for cola and hamburgers is given by U(C,H)=C 1/3H 2/3 , where C
and H are, respectively, the cans of cola and the number of hamburgers he consumes.
Draw two of his indifference curves with H on the vertical axes.
a) Draw two of his indifference curves with with H on the vertical axes.
b) What is his marginal rate of substitution of hamburgers for cola MRSHC=-dH/dC?
Does MRSHC depend on how much of the goods he consumes? What happens to
MRSCH as he has more and more colas?
c) Suppose that the price of a can of cola is $1, the price of a hamburger is $3, and
John's income is $27. Draw his budget line.
d) Find John's optimal consumption bundle.
e) Suppose that price of a can of cola is $2, the price of a hamburger is $6, and John's
income is $54. Draw his budget line, and find the optimal bundle.
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